The U.S. Department of Housing and Urban Development (HUD) has expanded the definitions of "foreclosed" and "abandoned" properties in order to speed up their purchase and rehabilitation, the housing agency announced Friday.
The agency’s $5.9 billion Neighborhood Stabilization Program grants funds to selected nonprofits and state and local governments for activities that will benefit low- and moderate-income people who don’t make more than 120 percent of an area’s median income. The Housing and Economic Recovery Act of 2008 established the program, which was further expanded with the American Recovery and Reinvestment Act of 2009.
Grantees must use at least 25 percent of the monies to buy and redevelop abandoned or foreclosed homes that will ultimately house people who make less than half of the area’s median income, according to the agency’s Web site. Grantees can also use funds to put financing mechanisms in place for that purchase and redevelopment, establish land banks for foreclosed homes, and/or tear down blighted structures.
Grantees must have pledged the first round of the program’s funding — the biggest portion of funding at $3.92 billion — by this September. Because of the program’s limited definitions of properties that qualified for assistance, HUD determined the program was not moving fast enough to stabilize affected neighborhoods.
"It became clear to us that the Neighborhood Stabilization Program as originally designed was too restrictive and limited the ability of our local partners to put this funding to work quickly. We need to be more flexible so our local partners can respond to market conditions and reverse the effects of foreclosure in these neighborhoods as quickly as possible," said Mercedes Márquez, HUD’s assistant secretary for community planning and development, in a statement.
The term "foreclosed" previously applied only to properties where the foreclosure process had been completed. …CONTINUED
"Many properties were lingering in the foreclosure process and beyond the reach of NSP. The original definition limited a grantee’s ability to intervene strategically when a lender initiates but does not complete foreclosure, or where a default is allowed to linger," the agency said.
Now, in addition to the previous definition, foreclosed homes will include properties that fall into at least one of these situations: 1) the owner is at least 60 days delinquent on a mortgage and has been notified; 2) the owner is at least 90 days delinquent on tax payments; 3) foreclosure proceedings have begun under state or local law; or 4) the foreclosure process is complete and lenders have transferred title to an intermediary aggregator or servicer that is is not a beneficiary of the program, the agency said.
The term "abandoned" previously applied only to properties that had been foreclosed and vacant for at least 90 days.
"This definition effectively excludes properties abandoned by owners but where tenants are still in place, thereby precluding local communities from assisting the properties with NSP funding or protecting the tenants’ occupancy," the agency said.
Now, abandoned homes will include those where the owner has not made mortgage or tax payments on the property for at least 90 days or a code inspection has declared the property uninhabitable and the owner has not corrected the problems within 90 days of notification, the agency said.
The new definitions are effective immediately.
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